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Every so often, we encounter marketers at hot new startups who ask the inevitable question: “How do I growth hack my way to a million users?”
While it’s tempting to give them stories of what successful brands have done in the past and lay out growth strategies, the question that we end up asking them back is:
What are you doing to retain the users you already have?
It’s an important question. Because no amount of growth marketing hacks will help you plug a leaky bucket of churning users.
Every growth hacking success story is one of a high-growth company that never loses focus on customer retention — meaning, they plan for it and strive to achieve it from the start.
Some sad facts:
44% of companies admit they focus more on customer acquisition than retention. And only 18% claim they focus more on retention.01
Meanwhile, you have mobile apps like Duolingo, who insist on tracking DAUs, session ends, and retention numbers on a daily basis.02
And you have global brands like Adobe Creative Cloud, whose Director of Growth, Thibault Imbert, underscores the need to always look for and track the core retention metric — the metric that shows that your user is getting value from your product.03
What does retention mean to those successful brands that have gone on to a million users? It means growth.
It cannot be an afterthought. It must be intentionally sought from the beginning. And more than that, it should be prioritized!
And what are the repercussions of choosing to prioritize retention at some later date? Read on for more details or jump straight to the infographic.
Day 1 retention is the first metric your app has got to master. Because if none of your users return the day after they install your app, you’re dead in the water.
None of the other marketing growth metrics will matter because no one’s sticking around. They’re abandoning ship faster than you can acquire new users.
24% of all apps are used only once! With that number in mind, your app is a guaranteed casualty if you’re not working to curb that churn rate and grow your user base.
Customer lifetime value (CLTV) is probably the next important metric your mobile app should track because it helps you figure out how much an average customer is worth to your company over the long haul. This, in turn, helps you determine your company’s worth.
But for companies that have not built up customer retention strategies from day one, that CLTV is bound to be low.
After all, the average repeat buyer spends 33% more than a new customer. Forget profit — a Bain & Company study claims you will never break even when you sell to one-time customers.04
The customers you do retain will always be more profitable and drive higher CLTV than one-time buyers.
If you aren’t making retention a priority, you’re pouring dollars down the drain.
Look at skyrocketing customer acquisition costs.
The average cost per install in 2018 was $4.08 with the cost per in-app purchase going up to $74.93, and cost per subscription rocketing to a high of $148.05
The point being: it costs a lot of money to bring in new users. Some studies claim it costs roughly 7x as much as retaining existing customers.
In fact, increasing customer retention by 5% increases profits by anywhere from 25 to 95%.06
High growth does not equal high revenues when you’re losing money on customer acquisition costs or win-back campaigns that could’ve been avoided if you’d only had the right customer retention strategies in place.
If retention isn’t a priority from day 1, then you’ll find that whatever customer loyalty you acquire will quickly fade with the rise in disappointed users.
What is the most direct cause of customer loyalty?
All of that customer loyalty you’ve built up can be lost quite quickly if no priority is given to retention, meaning little effort is made to improve the customer experience in favor of bringing in new users. When acquisition is the main focus, all optimization will take a backseat to acquisition.
Guess how customers will feel when the product begins to suffer, when your app doesn’t save them time, or when they feel like you’re not listening to their needs?
Bottom line: don’t focus on acquisition to the detriment of retention. As we said before, smart acquisition starts with user retention.
Place a solid focus on retention. Not when you’re 100 customers in, not even when you’re 100,000 customers in. It should start with your first customer.
You weave it into your brand’s DNA from the beginning and make sure that the culture you create puts an emphasis on tracking this metric. It’s the only strategy that guarantees survival for high-growth brands looking to last longer than today’s current fad.
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